Unlocking climate investment

With interest in renewables and clean technology at a high, why isn’t more investment flowing into these emerging sectors? Imperial’s Dr Charles Donovan explains how a new research fellowship supported by a £525,000 donation from Quinbrook Infrastructure Partners could help to provide the clarity that investors need.

Dr Charles Donovan, Director of the Centre for Climate Finance and Investment.

The 2015 Paris Agreement on climate change could unlock opportunities for investment worth trillions of dollars, as countries around the world begin to drive a shift towards a low-carbon economy. But while investor interest in renewables and clean tech is increasing, we aren’t yet seeing the level of investment that would be required to affect the kind of transformation that’s needed if we are to avoid catastrophic climate change.

What’s holding investors back? The problem, according to Dr Charles Donovan, Director of the Centre for Climate Finance and Investment at Imperial College London, is that big institutional investors don’t have the data they need to make informed decisions about where to invest.

“The investment community has really woken up to climate change over the last couple of years,” says Dr Donovan, “but until they have a better sense of the risks and rewards involved, we’re not going to see the kind of investment that’s needed to accomplish the transition to a low-carbon economy.”

It was to help investors and policymakers overcome this lack of clarity about risk and return in emerging clean technology sectors that the Centre for Climate Finance and Investment was established in 2016. Based in Imperial College Business School, the Centre brings together Imperial’s expertise in finance, data science and climate research to analyse investments in clean energy, energy efficiency and low-carbon infrastructure globally. Dr Donovan believes that the Centre’s data-driven approach can help to cut through investor uncertainty.

“Investors want to invest in clean technology and are asking how they can do that in a way that’s responsible to their shareholders or pension fund holders. We’re trying to break through this hesitancy, this roundand- round discussion, with really targeted numerical analysis.”

The work of the Centre received a substantial boost in 2018 thanks to a donation of £525,000 from Quinbrook Infrastructure Partners, a low-carbon and renewable energy infrastructure investment specialist. The gift establishes the Quinbrook Fellowship – a new academic post that will bring fresh expertise and additional capacity to the Centre. The successful Fellow’s research will look at the business models, financial instruments and investment strategies that can help the global economy adapt to climate change.

“We’re hoping to bring in a world-class scholar who can complement research across the Business School and become a leading voice in this area,” says Dr Donovan. One priority for the Fellow will be to remain responsive to the questions that the investment community is asking. “Investors can’t wait years for answers,” Dr Donovan says. “We need to think in terms of the weeks and months ahead. That’s where philanthropic support is particularly helpful. This gift enables research on a shorter timescale than would be possible through other sources of funding. It allows us to have immediate real-world impact.”

The fact that the post is philanthropically funded will also make it easier for Dr Donovan to recruit someone who can bridge the academic and business worlds. “Usually, when an academic appointment is made, the focus is on recruiting someone who is fully in the academic world – someone who can build the research profile of the institution. This gift frees us from that. It gives us the flexibility to recruit someone who has that academic background, but whose research is also going to have relevance to, and impact in, the business world.”

Such a major philanthropic investment in the Centre’s research will have a multiplier effect, opening up new sources of funding and signalling the interest that the business world takes in this nascent field. “The gift from Quinbrook Infrastructure Partners is a massive enabler,” says Dr Donovan, “and we are most grateful for their support. Having this philanthropic commitment allows us to bring in additional funding in the form of research grants and research contracts. And since ours is an emerging area of research, this donation will be seen as a vote of confidence. We’re building on their gift to create something that we hope will be here for the next hundred years.”